Finance and Tax Campaigns

Last year saw an unprecedented attack on the Private Rented Sector, with former Chancellor George Osborne announcing a raft of tax changes designed to hit buy-to-let landlords in the pocket.
The tax raid shook the very foundations of the sector at a time when the Government is more reliant than ever on private landlords to provide the rental homes that are so desperately needed across the country.

A 3% stamp duty surcharge was introduced on the purchase of buy-to-let properties and Mortgage Interest Relief will be cut to basic rate tax progressively from 2017. Capital Gains Tax changes are in the pipeline too.

It is clear that the PRS is being treated as a cash cow by the treasury. But the RLA is fighting back, lobbing at the very highest level to make changes.

Mortgage Interest Relief

George Osborne announced plans to restrict Mortgage Interest Relief for private landlords to the basic rate of tax, claiming that landlords are taxed more favourably than home owners.

An RLA survey of landlords shows that the proposals will mean higher rents for tenants, see repair and maintenance standards slip and stem supply of PRS housing at just the time when demand is soaring.

Landlords Steve Bolton and Chris Cooper are currently seeking consent to initiate a judicial review on George Osborne’s MIR proposals. However, after seeking its own legal advice the RLA was warned there was little chance of success if it pursued an extremely costly judicial review.

The RLA instead followed a political route and is starting to make an impact in Westminster, with a surge of support from Tory backbenchers who warned tenants will be the losers as rents increase. Conservative peer Lord Flight publicly backed the RLA campaign, writing an article for the Daily Telegraph in which he claimed attacking buy-to-let would worsen the UK’s housing crisis.

The RLA is now lobbying for the MIR changes to be applied to new borrowing only, a move that will minimise the impact of these changes on established landlords and businesses. It is also asking members to write to, or ideally meet with their MPs to discuss just how these changes will affect their businesses.

Stamp Duty Land Tax

A new 3% additional stamp duty rate on properties bought as buy to let or second homes was introduced from April this year.

George Osborne said he was introducing the new surcharge to ‘level the playing field’ between first time buyers and buy-to-let landlords. However an independent report from The London School of Economics argued that only a minority of sales to landlords involve bids from both types of buyer.

In an RLA survey the 84% of PRS landlords said they were likely to consider increasing rents as a result – meaning tenants will be paying the price. This includes would-be first time buyers saving for a deposit. 78% of landlords also said the changes would deter them from investing in more properties to rent, with half considering getting rid of rental homes.

The RLA is lobbying the Government to exempt all rental property making a net increase in the supply of new housing from the 3 percentage point stamp duty levy. A total of 39% of landlords reported that they would be more likely to invest in new build rental housing if this was exempt.

The table below sets out some examples of the levels of stamp duty paid on each purchase.

House Price

First Home

Buy to let/Second home

£100,000

zero

£3,000

£150,000

£500

£5,000

£200,000

£1,500

£7,500

£250,000

£2,500

£10,000

Capital Gains Tax

Under Clause 72 of the Finance Bill Capital Gains Tax will be reduced to 20% – except for the sale of residential property where the rate stays at 28%.

An RLA recommendation – to reduce Capital Gains Tax (CGT) paid by landlords when selling their rented home to sitting tenants – is now to be proposed as an amendment to the Finance Bill by MP Kevin Hollinrake after RLA research found 77% of private landlords would consider selling their property to tenants if the tax liability was reduced.

Mr Hollinrake supports the RLA - claiming the amendment will support the Government’s home ownership agenda while at the same time offering landlords a route out of the sector minimising the financial hit.

He is now lobbying for support among fellow MPs and once the amendment is tabled the RLA will be asking members to write to their MP encouraging them to back the amendment, once tabled.